J.J. McCullough: Canada’s dairy tariffs hurt trade, too

Thursday

Jun 14, 2018 at 12:30 PM

Canada is guilty of its own huge tariff, 270 percent on milk and others to protect Quebec agriculture. It not only hurts U.S. dairy trade, but Vancouver residents may pay nearly $5 for a pound of butter and $10 for 1.5 pounds of cheese.

One of President Donald Trump’s darkest talents is his ability to identify an opponent’s delicate spot and stab it remorselessly. From his knack for condescending nicknames (Low Energy Jeb, Little Rocket Man) to inviting Bill Clinton’s various accusers to the second presidential debate, there’s no denying the man has a skill for knifing sensitive areas.

And now he has found Canada’s vulnerable flank: dairy tariffs.

Though Canada enjoys broadly free trade with the United States through the North American Free Trade Agreement, it has never been absolute, and the deal makes several concessions to Canadian protectionism and politics. Chief among them are Canada’s extraordinarily high tariffs on American dairy products, which at last week’s Group of Seven summit in Quebec, Trump correctly identified as a “270% tariff.”

As the CBC reminded, “Canada levies a tariff of 270 percent on milk, 245 percent on cheese and 298 percent on butter in an effort to keep U.S. and other foreign dairy imports out.” These tariffs exist almost exclusively for the benefit of the agriculture sector of Quebec, a province with a unique stranglehold on Canadian politics.

Trump has cited these “unfair” dairy tariffs again and again in rationalizing his desire to retaliate economically against Canada, and though one can easily question the common sense of starting a mutually destructive trade war with one of the United States’ closest allies over this, it’s equally wrong to dismiss the subject of Trump’s annoyance as frivolous. The Canadians certainly don’t consider it so.

The wisdom of the dairy tariffs is a source of debate and second-guessing in Canada, and we can’t take for granted that voters will stand foursquare behind Prime Minister Justin Trudeau as he insists that dairy protectionism is something he’s “100 percent” ready to defend.

Trudeau has, in fact, all but bragged about instigating the latest conflict, stating prior to the Quebec summit that the “reason why Donald Trump continues to write tweets on dairy products and Canada — it’s because I’ve told him many times: ‘No, he won’t touch, we won’t touch our supply management system.’ “ This is a curious calculation, both as foreign policy and domestic politics.

Here in Vancouver, most of the dairy in my local supermarket is produced by dairy companies based in Quebec, some 2,100 miles east. I can buy a half gallon of milk from the Agropur dairy cooperative of Longueuil for $2.85, or get a 16-ounce bottle of “Milk-to-Go” from Saputo Inc. (Saint-Laurent, Quebec) for $2.31. Buying a pound of Agropur butter costs $4.87, while 1.5 pounds of Saputo cheddar will set me back $9.74.

These prices are, as the U.S. president might say, terrible deals. Less than an hour’s drive south, comparable products sell for half as much in the United States, which has led to the preposterous spectacle of cheap Canadians crossing the border on milk and cheese runs, propping up the economies of border towns such as Point Roberts, Washington.

To call this a minor triviality of Canadian life is to ignore one of the country’s highest-profile policy debates of the past half-decade. In 2012, centrist Liberal politician Martha Hall Findlay provoked the conversation by running for her party’s leadership on what was a mostly one-issue campaign to abolish dairy tariffs. Though ultimately unsuccessful, her taboo-breaking crusade inspired a deluge of favorable editorials that helped make “supply management” — the Canadian jargon for dairy protectionism — a household phrase.

On the conservative side, libertarian former cabinet minister Maxime Bernier faced cries of hypocrisy when, as minister of industry, and later foreign affairs, he was forced to endorse the tariffs. In his subsequent run for Tory leader, he atoned for past misdeeds by campaigning hard against supply management, calling it the work of a “cartel” forcing high prices on Canadian families “to protect 10 percent of farmers” in the country. The fact that Bernier, a Quebecer himself, narrowly lost several Quebec ridings to rival Andrew Scheer was widely interpreted as evidence that the dairy vote played a significant role in the outcome.

“I certainly do not owe my leadership victory to anybody,” Scheer joked at a press gallery dinner, taking a showy gulp from a Saputo milk carton.

Support for supply management is a difficult issue to poll, largely because the Canadian public has only the dimmest awareness of the status quo. Yet judged by their actions, culture and temperament, it does strain credibility to believe that there exists a broad-based constituency in favor of paying more for a basic staple in order to further benefit a province already widely resented for its coddling by Ottawa.

Yet this is the trade-war hill that Trudeau has chosen to die on. He has alienated the entire western half of his country through bungled oil and pipeline policies, and now his path to a second term in next year’s election seems increasingly tied to maintaining the goodwill of Quebec.

Americans do not have spotless hands when it comes to using unfair measures to protect their own sacred industries, yet it’s a myth to believe Canada has ever had much interest in running hard in the opposite direction, and embracing the sort of unqualified economic integration with the United States equivalent to that enjoyed among member nations of the European Union, or one American state to another.

The consequences of this long-standing approach, which has always been grounded in economically regressive nationalism and politics, will now be felt. For centuries, much of Canadian policymaking has been justified on the grounds that maintaining sovereignty from the United States is the highest good. It works fine — so long as the United States never feels the need to indulge in a bit of pompous sovereignty of its own.

J.J. McCullough is a writer based in Vancouver, Canada.

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